On this episode of The Performance Marketing Podcast, Joel sits down with John Guenther of Product Launcher to discuss how Amazon fits into the sales channel mix for small to mid-sized ecommerce businesses. We dig into the pros and cons of selling through Amazon compared to selling directly through your website, and what you should prepare for if you decide to take the plunge with Amazon.
John is an entrepreneur and Amazon selling expert who helps businesses get the most out of their Amazon store.
Podcast Transcript: Should Your Business Be Selling on Amazon?
Q (Joel): Why don’t you tell us a bit about what you look for when you’re evaluating a new brand or a startup and they’re considering Amazon, what makes them potentially a good fit for the platform?
A (John): I like to think of the spectrum of Amazon’s port, on the one end you have the people that wanna learn how to sell on amazon themselves, kind of the DIY community (well served niche right now)- on the other end of the spectrum are the large agencies who are focusing on big national brands, and in the middle of those fall small businesses (that often don’t have a good way to get support they might need) – that’s where Product Launcher comes in.
We work with all types of businesses from those just starting out, to those larger brands who don’t want to have an internal amazon consultant (one of the downfalls of selling on Amazon is that it’s always changing and it’s pretty complex).
Short Answer: anybody who has a physical product, should be considering selling on amazon (the metrics speak for themselves, 2 million+ Prime shoppers, 3rd party sales (the types of sellers that Product Launcher supports), had roughly 25 billion in sales for Q2 of this year) It’s continuing to grow and the dollar opportunities are huge.
*Most important benefit is your opportunity for brand control, before someone else, like one of your resellers, decides to take your product to Amazon first (logo updates, brand mission, product description, photos & imagery etc..)
Q: What are you seeing strategically, you know it feels like it’s getting more challenging (competing for space/visibility on Amazon) is that what you’re seeing on your end as well, has it become harder over time?
A: Yes. The days of get-rich-quick schemes to take junky products to page 1 of search results by manipulating the organic rankings etc… are long gone. At this point the sellers are very sophisticated, if you’re in any kind of competitive niche (with a few exceptions) they know there’s a lot of other sellers and if you’re not at least matching their level you’re going to always be behind them.
The other piece of it that’s gotten more competitive and more costly is PPC (Pay Per Click Advertising) As I often say, there’s really 3 pillars of success on Amazon:
- High quality, differentiated product
- Fully optimized listing (sales can’t happen if no one knows you exist and you’re not showing up for the search terms you want to be showing up for in the search results)
- Advertising (CPC is rising because of volume and traffic competition to be in the top sponsored ad spot on search results)
**Because newer business starting out are really looking to gain awareness (eyeballs on the site/product, clicks etc..) unfortunately CPC is so expensive and it’s a bidding war, but you need to compete starting out and later on once you’ve built of your awareness and reviews, you can start focusing on profitability as you grow.
Q: How should brands be thinking about profitability when they start out on Amazon? How long should someone expect to invest in Amazon before they really start seeing profitability from them?
A: Going into it you have to have a good feel for all of the fees and metrics of Amazon selling. There’s the 15% category referral fee for nearly all categories on Amazon, FBA fee (Fulfilled By Amazon) based on volume and weight of your product, (100% recommend that everybody opt for that when it’s feasible and possible because your conversion rate will be much higher than if you opt for FBM (Fulfilled By Merchant) Storage and inventory fees (can be kept low if you have a good handle on your product) and finally Advertising fees. After factoring those in (and the cost of shipping your goods to Amazon in the first place) you can assess what you’re left with and evaluate your profitability.
**My recommendation is that you price your Amazon listing slightly higher (than what you would sell it for directly from your website) this can help support your brick and mortar stores and ultimately give you that full pricing control vs. someone coming and selling it for you for cheaper which can frustrate your brick and mortar. This is easier to get around for small businesses (Amazon doesn’t really want you selling products for cheaper on other sites than their own)
Q: For anyone who’s tempted to manage it on their own and go the FBM route, what are you seeing for differences in performance from a customer standpoint (people who love to shop Prime and feel more confident when it’s fulfilled by Amazon) are you seeing a difference in performance between those two? (FBM vs. FBA)
A: It’s pretty remarkable, yeah. There’s a lot of common misconceptions from sellers about FBA, one that I’ve heard is, “I didn’t wanna do FBA because I don’t have thousands of units to send into the FBA warehouse” You don’t have to have a large amount of product inventory to go the FBA route, you can send in one product, or like for many of our small businesses starting out, we’ll send in maybe 30 to start. Overall most clients see a huge difference in sales when using FBA (combined with other factors such as optimization and PPC advertising)
Q: I’m curious if you’re running into brands who have found success on Amazon, and would like to sell directly on their own websites as well, how are they able to balance that, are you seeing brands that are able to do both at the same time?
A: It’s a challenge for sure, (to do both effectively) but I think it’s definitely something everyone should be doing. One of the disadvantages you have with Amazon FBA, is that you don’t get any contact information from the customer, and Amazon owns Amazon’s customers. On your own site you’re able to capture those emails and build that list, which is super important for future product launches, even if you’re going to launch just on Amazon, you can run promotions to drive external traffic in. I 100% recommend that everybody have both presences available, even if Amazon is going to dominate sales for a while, at least initially, even just from a diversification standpoint, as well as list building and customer engagement.
And there’s other strategies you can use to drive traffic that originated on Amazon, back to your site (a cool product insert, something exclusive that’s only offered on your site, i.e- a digital download that provides extra recipes for your food related product, etc…)
Q: We’re coming up on the Holiday season and we know last year all the issues that popped up with shipping delays and being able to get your product out on time. What are some things that you’re anticipating coming up that may be a challenge for online retailers?
A: One of the biggest challenges for most of my clients actually, unfortunately, is just having product to sell. The delays worldwide with shipping logistics and infrastructure have impacted everybody. Even if we have made in America products, we have small parts that are shipped in from China that are delayed and that’s the issue with several of mine (clients). I think whoever has inventory and stock at Amazon (approaching the holiday season) is gonna do really well. Get your stuff in (Amazon puts out a cutoff date of October 15th to get product out for Black Friday) as soon as possible to have selling capabilities. Overall, there will likely be more general delays and higher costs in shipping this year as well.
Joel: Well John, thanks for all this information today, this was great and a really helpful way to think about it for people who are considering Amazon (selling) or have been dabbling so to speak, try to think about how it can fit into their overall marketing strategy and what those next steps may be.
If people want to get in touch with you, what’s the best way?
John: The agency is called Product Launcher, website: https://www.getproductlauncher.com/If they have a product they’re ready to launch and sell, my team and I do a free product analysis so they can sign up for that otherwise my email is email@example.com
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